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Court Finds “Strong Inference” of Discrimination in Louisiana/HUD Post-Hurricane Recovery Program

Friday, July 30, 2010

The funding formula used to provide grants to New Orleans residents whose homes were damaged or destroyed by Hurricanes Katrina and Rita very likely disadvantaged black homeowners because it was based on depressed property values that result from both current racial isolation and the city’s segregated past, a U.S. District Court judge has indicated.

As the judge noted in a recent ruling, this has meant that black New Orleans homeowners have likely been shortchanged, compared to white homeowners, in the amount of monies they’ve received to restore their homes since the massive rebuilding effort began there.
 
Construction woman working on  a houseThis ruling stems from a lawsuit filed by five black New Orleans homeowners and two fair housing organizations challenging the funding formula used to distribute funds under the “Road Home Program,” which was approved by the U.S. Department of Housing and Urban Development (HUD) and initially created by the Louisiana Recovery Authority – the state agency that designed and administered the program until June 30, 2010, when it was succeeded by Louisiana’s Office of Community Development.  The plaintiffs in the case are represented by the NAACP Legal Defense and Educational Fund, the Washington, D.C. law firm Cohen Milstein Sellers & Toll, PLLC, the law firm of WilmerHale, and the Greater New Orleans Fair Housing Action Center.
 
The lawsuit claims that the Road Home Program formula violates the Fair Housing Act of 1968 and the Housing and Community Development Act of 1974 because it bases grant awards on the lower of two values – the pre-storm value of one’s home, or the estimated cost to repair the home.  Because black homeowners tend to own homes that have lower market values – even compared to nearly identical homes in majority white neighborhoods – they are disproportionately impacted by this formula.
 
In his ruling, handed down as we approach the five-year anniversary of Hurricane Katrina,  U.S. District Court Judge Henry H. Kennedy, Jr., declared that the “statistical and anecdotal evidence” submitted in court “leads to a strong inference that, on average, African-American homeowners received awards that fell farther short of the cost of repairing their homes than did white recipients.”
 
Judge Kennedy pressed his concerns about the program’s flawed design by stating that “The Court does not take lightly that some African-American homeowners received lower awards than they would have if their homes were in predominantly white neighborhoods.  And, although the Court appreciates that all of the parties are committed to the rebuilding of a city that has suffered greatly, it is regrettable that this effort to do so appears to have proceeded in a manner that disadvantaged African-Americans homeowners who wish to repair their homes.”
 
Judge Kennedy denied the plaintiffs’ request to freeze the distribution of surplus funds until the court could rule on the ultimate question of whether the formula left black homeowners with less funds to rebuild than other homeowners.  While persuaded that the formula likely disadvantaged black homeowners, Judge Kennedy held that the Court lacked authority to fix the problem for those who had already received grant awards under the discriminatory formula.  However, he did indicate that he may be able to offer relief to those who have not yet received grant awards, thereby stopping the discrimination before it happens.  In light o this decision, the plaintiffs have field a motion to protect those homeowners who have not yet received grant awards.  And they have also appealed the portion of the decision in which the judge denied relief to those who were likely discriminated against in the past.
 
The Plaintiffs believe that Road Home funds, which were made available by Congress and must revert back to the federal treasury if unspent, are not subject to traditional legal barriers that bar lawsuits against states for money damages due to past illegal actions.  Most importantly, the Plaintiffs are concerned that the funds at issue could be reprogrammed and allocated for other uses before an appeal could resolve the question. They have asked that Louisiana and HUD correct these violations of the Fair Housing Act and Housing and Housing and Community Development Act immediately, by giving all New Orleans homeowners a fair opportunity to receive the resources they need to rebuild their homes and their communities